As a general rule rent is exempt from VAT unless the landlord has opted to charge VAT. On 1 October 2012 the Value Added Tax Act 1994 was amended so that VAT became payable on rent in respect of properties leased for “the self storage of goods”. VAT is payable on such properties even if the landlord has not elected to tax.

When the legislation first came into force it was understood that it only applied to specialist companies which provide self-storage facilities to the public. There was some confusion as to what “self storage” means. In August 2013, the Inland Revenue issued Information Sheet 10/13 in order to clarify the matter. It states that there is no difference between “storage” and “self storage” and the rules apply to any space used for storage as long as it is the whole or part of a building, container or other structure which is fully enclosed. Furthermore, even if storage is not a permitted use under the lease the VAT is automatically chargeable. The scope of the legislation has therefore, been extended.

If storage is ancillary to the main business in the same building, for example a stock room in a shop, VAT is not automatically chargeable. The following also remain exempt from VAT: the storage of live animals, storage premises rented to a charity and used for non-business purposes, and where there is an agreement between connected persons and the premises fall within the capital goods scheme.

The main impact of the change for landlords who have not opted to tax is that they will need to monitor how the premises are used in order to avoid being liable to account to HMRC for VAT from the rent received. . It is recommended that in such circumstances landlords seek written confirmation from tenants as to the use of the property and require that tenants inform them of a change in use. However, a regular inspection of the property would be more reliable.

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